With softmodding, you're likely to run into problems with dashboard and live updates. With tsop flashing, you're gonna need a v1-1.1 xbox that has a 1mb bios that you can split into 4. You can then run switches to switch between the 4 bios's (one being original). With the hdd upgrade (hard to do with a softmod box) you can run a switch between stock hdd and "backup games" hdd or I "think" you can just lock the new hdd with the old ones lock code. Any of these things is gonna take much more research than you're gonna find on this site. I suggest you look to xbox-scene.com if you plan to pursue any of these. Personally, I don't think xbox live is worth not having a fully modded xbox for. There are services like kai that allow you to play system link games online for free.
-Yes the ata133 cable was a myth, but a higher quality cable could make a small difference.
-In addition to upgrading the cpu, you could upgrade the ram which would only benefit running linux, development software, or other non-official software on it.